International Paper rules out fresh bid for Smurfit Kappa despite 6 June deadline

Deadlock continues as International Paper (IP) has said it will not make a hostile bid for Smurfit Kappa, after an Irish regulatory panel gave a 6 June deadline to make a binding offer.

The Irish Takeover Panel (ITP) has ruled the deadline is important to remove continued uncertainty.

In response, International Paper said: “From the outset, IP has stressed the importance of proceeding on an agreed basis. To that end, IP confirms that it will not proceed with a binding offer unless it is recommended by Smurfit Kappa’s board of directors.”

The Memphis, USA based packaging giant said “its current proposal represents a compelling strategic and financial rationale for a combination with Smurfit Kappa”.

The board at the Irish paper giant reiterated it had unanimously rejected those proposals on the basis that they are significantly below the Board’s assessment of ‘the Group’s true intrinsic worth’ and prospects and remain significantly below the valuations set by recent industry transactions.

“The Board continues to believe that the best interests of the Group’s stakeholders are served by pursuing its future as an independent company, operating as the European and Pan-American leader in paper-based packaging,” said a Smurfit statement.

Despite both companies sticking to their positions, it would not be shocking to see IP submit a fresh offer before the 6 June deadline – given the merits of such a significant deal.

Barry Sheehan, director at Livingstone Partners, told Packaging News Smurfit Kappa is the logical European target for IP.

“We expect the open dialogue to continue. To the extent International Paper don’t succeed in their bid, alternate European targets such as DS Smith or Europac, could also offer strong synergy potential.”

In this regard, IP has left the door open, saying it would be willing to provide Smurfit Kappa shareholders a “mix and match” facility, allowing them a greater or lesser proportion of cash or IP shares that were offered in its March bid.

But this view is not shared across the board.

Nicholas Mockett, head of packaging M&A at Moorgate Capital, said the stance taken by Smurfit looks like an endorsement by current shareholders of the management team and the performance of the business highlighted by the Q4 2017 results and announcements relating to 2018 Q1 and Q2, as recently reported.

“Management will be able to focus on the on going successes without the distraction of an unwanted predator, not to mention the costs of defending the company, which are likely already considerable.”


Speaking at a Goldman Sachs Basic Materials conference in New York, Glenn Landau, IP’s chief financial officer, was reported to have described the company’s takeover move on Smurfit Kappa as “special and somewhat unique” and stressed the group was not just “ticking the box”. He added “we do not need to do this deal” and claimed Smurfit Kappa was “depriving its own shareholders of this opportunity”.

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